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On detection of volatility spillovers in overlapping stock markets

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  • Kohonen, Anssi

Abstract

This paper applies a recently proposed structural vector autoregressive model identification method to an established, previously unidentified theoretical model of stock market volatility spillovers. The structural model is identified and can be estimated with the method of maximum likelihood. Volatility spillovers can then be tested with the standard likelihood ratio test. This way our test, unlike the majority of the existing volatility spillover tests, has its foundations firmly in the economic theory. Our test is developed for fully overlapping stock markets. The empirical application of the paper considers stock markets of the eurozone in the years 2010–2011. Evidence of volatility spillovers is found.

Suggested Citation

  • Kohonen, Anssi, 2013. "On detection of volatility spillovers in overlapping stock markets," Journal of Empirical Finance, Elsevier, vol. 22(C), pages 140-158.
  • Handle: RePEc:eee:empfin:v:22:y:2013:i:c:p:140-158
    DOI: 10.1016/j.jempfin.2013.04.005
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    Citations

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    Cited by:

    1. Linh Xuan Diep Nguyen & Simona Mateut & Thanaset Chevapatrakul, 2016. "Business-Linkage Volatility Spillover between US Industries," Discussion Papers 2016/05, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    2. Sun, Hang, 2016. "Crisis-Contingent Dynamics of Connectedness: An SVAR-Spatial-Network “Tripod” Model with Thresholds," Research Memorandum 032, Maastricht University, Graduate School of Business and Economics (GSBE).
    3. Gagnon, Marie-Hélène & Power, Gabriel J. & Toupin, Dominique, 2016. "International stock market cointegration under the risk-neutral measure," International Review of Financial Analysis, Elsevier, vol. 47(C), pages 243-255.
    4. He, Hongbo & Chen, Shou & Yao, Shujie & Ou, Jinghua, 2014. "Financial liberalisation and international market interdependence: Evidence from China’s stock market in the post-WTO accession period," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 33(C), pages 434-444.
    5. Horta, Paulo & Lagoa, Sérgio & Martins, Luís, 2014. "The impact of the 2008 and 2010 financial crises on the Hurst exponents of international stock markets: Implications for efficiency and contagion," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 140-153.
    6. repec:eee:riibaf:v:42:y:2017:i:c:p:727-744 is not listed on IDEAS

    More about this item

    Keywords

    Volatility spillovers; Contagion; SVAR identification; Hypothesis testing; Stock markets; Euro debt crisis;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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